What Is the Significance of the Price-to-Sales (P/S) Ratio in Valuing a Revenue-Generating Protocol?

The P/S ratio is a valuation multiple that compares a protocol's market capitalization (Price) to its total protocol revenue (Sales). It is useful for valuing high-growth protocols that may not yet be profitable, as revenue is less susceptible to accounting manipulations than earnings.

A lower P/S ratio relative to peers may suggest the protocol is undervalued, while a high ratio suggests high growth expectations.